[Federal Register Volume 63, Number 128 (Monday, July 6, 1998)]
[Notices]
[Pages 36462-36464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17710]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40137; File No. SR-NASD-98-43]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the National Association of 
Securities Dealers, Inc. to Extend the Deadline for Presently 
Registered Representatives to Apply for the Equity Trader, Series 55 
Examination

June 26, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 12, 1998, the National Association of Securities Dealers, Inc. 
(``NASD'' or ``Association'') through its wholly-owned subsidiary, NASD 
Regulation, Inc. (``NASDR'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
by the NASDR. The NASDR has designated this proposal as one 
constituting a stated policy, practice, or interpretation with respect 
to the meaning of an existing rule under Section 19(b)(3)(A)(i) of the 
Act,\3\ which renders the rule effective upon the Commission's receipt 
of this filing. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(i).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The NASDR is proposing to amend NASD Membership and Registration 
Rule 1032 to change the date by which registered representatives who 
currently trade equity securities in the Nasdaq Stock Market (Nasdaq) 
and/or over-the-counter must apply for Equity Trader registration. 
Below is the text of the proposed rule change. Proposed new language is 
in italics; proposed deletions are in brackets.
Rule 1032. Categories of Representative Registration
* * * * *

(f) Limited Representative--Equity Trader

* * * * *
    Before registration as a Limited Representative--Equity Trader as 
defined in subparagraph (1) hereof may become effective, an applicant 
must:
* * * * *
    (B) pass an appropriate Qualification Examination for Limited 
Representative-Equity Trader. Any person who was performing any of the 
activities described in paragraph (f)(1) above on or prior to May 1, 
1998 and who has filed an application to take this examination by 
[(date thirty (30) days after the effective date of this rule)] August 
31, 1998 must pass the examination by [(24 months after effective date 
above)] May 1, 2000. Any person who is eligible for this extended 
qualification period and who fails this examination during [such] the 
twenty-four (24) month time period commencing on May 1, 1998 and ending 
on May 1, 2000 must wait thirty (30) days from the date of failure to 
take the examination again. Any person, other than a person who is 
eligible for the extended qualification period, who files an 
application to take this qualification examination after [(date thirty 
(30) days after the effective date of this rule)] May 1, 1998 must pass 
this examination before conducting such activities as described in 
paragraph (f)(1) above. In no event may a person who is eligible for 
the extended qualification period function as an Equity Trader beyond 
the 24-month period without having successfully passed the appropriate 
qualification examination.

[[Page 36463]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the NASDR included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The NASDR has prepared summaries, set forth in sections 
A, B and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On January 2, 1998, the Commission approved the NASD's proposal to 
amend NASD Rule 1032 to add an additional category of representative 
registration.\4\ Specifically, Rule 1032(f) requires each registered 
representative who engages in proprietary or agency trades of equities, 
preferred securities or convertible debt securities otherwise than on a 
securities exchange, or who directly supervises such activities (i.e., 
functioning as an ``Equity Trader''), to register as a Limited 
Representative-Equity Trader. In order to register as a Limited 
Representatives-Equity Trader, the representative must be registered as 
a General Securities Representative or as a Limited Representative-
Corporate Securities, and must pass the Series 55 examination.\5\ The 
rule contains an exemption for representatives whose principal trading 
activities involve executing orders on behalf of an affiliated 
investment company that is registered with SEC under the Investment 
Company Act of 1940.
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    \4\ See Securities Exchange Act Release No. 39516, 63 FR 1520 
(January 9, 1998) (order approving File No. SR-NASD-97-21).
    \5\ Registered representatives who have been ``grandfathered'' 
from taking the Series 7 or the Series 62 examinations will not be 
required to take either examination in order to take the Series 55 
examination.
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    The rule provides that presently registered representatives who 
file an application to take the Series 55 examination within 30 days of 
the effective date of the rule must pass the Series 55 examination 
within 2 years of the effective date of the rule. The effective date of 
the rule was April 1, 1998, which was announced in Notice to Members 
98-17. Accordingly, a presently registered representative had until May 
1, 1998 to file an application to take the Series 55 examination and 
until May 1, 2000 to receive a passing score on the exam. The rule also 
provides that any person, including a presently registered 
representative, who files an application to take the Series 55 
examination after May 1, 1998 must pass the Series 55 examination 
before functioning as an Equity Trader.
    It has come to the NASDR's attention that many presently registered 
representatives who would have been eligible for the two year grace 
period to pass the Series 55 examination failed to file applications by 
May 1, 1998. Thus, such registered representatives must immediately 
cease functioning as Equity Traders until they pass the Series 55 
examination. As discussed above, the original proposal provided 
presently registered representatives 30 days from the effective date of 
the rule to file applications to take the Series 55 examination. The 
NASDR believed this would provide such representatives sufficient time 
to file the requisite applications. Unfortunately, this has not been 
the case. If the deadline is not extended, those registered 
representatives who failed to file applications by the deadline will be 
forced to cease certain activities, which could cause disruptions at 
NASD member firms and could cause harm to customers. The NASDR does not 
believe the markets or customers will be served by a strict application 
of this administrative deadline. Consequently, the NASDR is proposing 
to extend the deadline for filing an application from May 1, 1998 until 
August 31, 1998. This will allow a registered representative who had 
been eligible for the two year grace period but failed to file an 
application by May 1, 1998 to file an application by August 31, 1998 
and continue to function as an Equity Trader until he/she receives a 
passing score on the Series 55 examination. However, such registered 
representative cannot continue functioning as an Equity Trader after 
May 1, 2000 unless he/she receives a passing score on the Series 55 
examination before May 1, 2000. Any person not functioning as an Equity 
trader on or before May 1, 1998 must pass the Series 55 examination 
before functioning as such.
2. Statutory Basis
    The NASDR believes the proposed rule change is consistent with 
Section 15A(b)(6) of the Act,\6\ which requires, among other things, 
that the Association's rules must be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest. The NASDR believes the proposal is consistent with the 
Act because it continues to require presently registered 
representatives to receive a passing score on the Series 55 examination 
before May 1, 2000 and to cease conducting certain specified activities 
if a passing score is not received by that date. The proposed change 
only allows certain registered representatives additional time to file 
applications to take the Series 55 examination.
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    \6\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The NASDR does not believe that the proposed rule change will 
impose a burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The foregoing rule change constitutes a stated policy, practice, or 
interpretation with respect to the meaning, administration or 
enforcement of an existing rule of the Association and, therefore, has 
become effective pursuant to Section 19(b)(3)(A) of the Act \7\ and 
subparagraph (e) of Rule 19b-4 thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 19b-4(e).
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    At any time within 60 days of the filing of such rule change, the 
Commission may summarily abrogate such rule change if it appears to the 
Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Copies of the submissions, all subsequent amendments, all written 
statements with respect to the proposed rule

[[Page 36464]]

change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for inspection and copying in the Commission's Public 
Reference Room, 450 Fifth Street, NW., Washington, DC. Copies of such 
filing also will be available for inspection and copying at the NASD. 
All submissions should refer to File No. SR-NASD-98-43 and should be 
submitted by July 27, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-17710 Filed 7-2-98; 8:45 am]
BILLING CODE 8010-01-M